Does RFRA Exempt For-Profits from Anti-Discrimination Laws?

This Tuesday the Supreme Court will hear consolidated oral arguments in two cases in which religious for-profit companies challenge the Affordable Care Act (“ACA”) contraception mandate. The ACA requires employer-sponsored health plans to provide preventive healthcare services, including all FDA-approved contraceptive methods, at no out-of-pocket expense to employees. In each of these cases the company objects to the mandate because of the corporate owners’ religious objections. These petitioners voice a deep anxiety about the direction of American society in the wake of a break-up of the largely Christian ethical consensus that had provided the de facto basis of American law until the 1960s.

The cases that reach the Supreme Court next week consist of one case from the 10thcircuit that has found that RFRA requires an exemption from the mandate for for-profit religious employers, and a case in which a federal appellate court in the 3rdcircuit found that an exemption is not required. Because of this split in interpreting and applying federal law in different jurisdictions, the Supreme Court must issue a decisive ruling to resolve the conflict. The Court has allotted one hour for consolidated oral argument on the issues raised by these cases combined (the “Hobby Lobby Cases”). At the conclusion of that hour the Court will need to decide whether religious freedom entitles the challengers to an exemption from the law.

The challengers each allege that the mandate violates its religious freedom, as protected under the Religious Freedom Restoration Act of 1993 (“RFRA”). In their view, material support for the use of, at least some, FDA-approved contraceptive methods is sin, and they argue that they are being forced to either offer material support for sin or suffer federal penalties that could be economically devastating. They claim that this means the mandate imposes a substantial burden on their right to religious exercise and are therefore entitled to an exemption under RFRA. RFRA requires an exemption from a law that imposes a substantial burden on the free exercise of religion, unless the government has a compelling interest and has narrowly tailored pursuit of that interest to avoid substantially burdening the religious exercise of its citizens. This so-called “substantial burden” test effectively means that the government must show both that it has a compelling reason supporting the law and that it has adopted the means of pursuing that law that are the least likely to restrict religious freedom. Otherwise, the state must grant an exemption that unfetters religious exercise from the burden the law imposes.

The ACA mandate was enacted both because of the public health interest of providing preventive care and because women of childbearing age bear on average 68% higher healthcare costs than men. Accordingly, the mandate is a measure designed to redress an unequal economic burden borne by women. The companies who challenge the ACA mandate thus seek exemption from a federal law requiring healthcare benefits to be distributed equally among employees. Employer-sponsored health plans are a component of an employee’s compensation. A religious-employer exemption would require employees to bear the cost of those services that their employers refuse to cover, which means such employees would effectively be paid less. This is the harm the mandate is designed to redress. Thus a key question for the Court to consider will be whether RFRA provides a statutory right for employers to pay some employees less because of their religious values. In reaching its decision, the Court will first have to decide whether for-profit companies have a right to religious free exercise, and if so, the scope of that right.

The first issue before the Court is the preliminary issue of who has standing to sue. The standing question asks whether a for-profit corporation or its owners has a right to religious free exercise, which suffers a substantial burden. Under corporate law, the personhood of a corporation is distinct from the identity of its owners. Claimants argue that the law implicates the rights of shareholders because it interferes with their freedom to express their religious convictions, manifest in how they run their company. However, courts are generally reluctant to grant so-called “third-party” standing, in which the corporation gets its day in court to argue the interests of a separate party, in this case its shareholders. The Supreme Court may seize upon this line of reasoning to avoid getting embroiled in the underlying issues of the case. But rejecting the standing of the corporation to defend the religious rights of its shareholders would not completely dispose of the case. There is still the matter of whether the corporation itself has rights to religious exercise that are at stake.

Proponents of the mandate ask whether it makes sense to attribute “religion” to a corporation. But that question itself implies a distinctly Western Protestant view of religion as a personal, individual phenomenon, one concerned with a soul’s encounter with the divine will. This view of religion as primarily a matter of private belief fails to consider other ways that religion may be entwined in the fabric of the lives of individuals and communities. Throughout much of its history, the Court itself embraced this view of religion, which allowed it to distinguish between religious beliefs that are protected by the First Amendment and actions, which the Court saw as within the government’s authority to regulate. The distinction between acts and beliefs elides the ways that religious commitments compel action or abstention. Court watchers noted that the belief-act distinction tended to shut-out non-Christian claimants, such as Native Americans. The Supreme Court reasserted the belief-act distinction in the 1990 decision in Employment Division v. Smith. That case was so unpopular it inspired RFRA’s enactment, as a way to ensure that religiously-motivated behavior or abstention would be safeguarded from government interference.

It thus quickly becomes clear that RFRA is concerned with more than personal conviction. The question then becomes what kinds of rights to religious freedom could a corporate entity have? Associations and groups certainly have rights to religious freedom. Then, does a non-profit religious organization, such as a church, have rights that a for-profit company would not? While it may seem at first blush that there is an important distinction between a non-profit entity organized for public benefit and an entity organized for profit, even a for-profit company could be founded on religious principles and serve a religious purpose, thus presenting a cognizable claim under RFRA. For example, a for-profit kosher butcher shop could seek exemption from laws requiring unkosher butchery (which they are: federal regulations require that animals be stunned before slaughter, but exempt ritual slaughter).

Challengers of the ACA mandate cite Braunfeld v. Brown to support the proposition that a for-profit company can assert a claim of religious free exercise. However, in that case the Court found that Jewish shopkeepers did not have a right to relief from a Sunday closing law on pain of financial ruin. While the Court heard the shopkeepers’ plea, it rejected it. Thus, reliance on that case is misplaced. Claimants appeal to that case because a religious business owner was faced with a Hobson’s choice. InBraunfeld the claimants argued that religious law compelled them to close up shop on Saturday and secular law compelled them to also close up shop on Sunday. This rendered them unable to compete in the free market. Here claimants argue that the imposition of an exorbitant fine for not complying with the mandate amounts to coercing them to violate religious principles or suffer financial ruin.

However, the conflict of moral duties at stake in the Hobby Lobby Cases is less direct than in Braunfeld. In addition, in the instant cases the Court must also consider the rights of employees. Claimants argue that they have a moral obligation to refrain from facilitating another individual’s decision to sin. The judges of the 10th circuit recognized this claim as grounds for an exemption from the law. They focused their analysis on the issue of whether the mandate would require only indirect or proximate sin. The court found that it must accept the claimant’s sincere allegations that compulsion to engage in acts, the remote or indirect effects of which violate religious scruples, burdens religious freedom. This is because the court found it lacks jurisdiction to judge the issue of moral culpability. In reaching this conclusion, the court relied on an earlier precedent involving a Jehovah’s Witness who objected to the draft. In that case, a Jehovah’s Witness who was a conscientious objector to war was offered work in a metal foundry, as an alternative to the draft. He accepted that posting, but refused a later transfer from the foundry to the factory. The fabrication of tank turrets, he argued, was against his religious opposition to waging war. The court accepted that claim and the 10th circuit relied on this precedent as authority for deferring to a claimant’s judgment of what kinds of conduct would violate religious scruples.

The 10th circuit interpreted that earlier ruling as standing for the principle that the ultimate moral culpability for the effects of one’s conduct is a theological question that the court is not empowered to decide. However, an objective line can and should be drawn between the government compelling an action that contradicts religious teaching, and the government compelling an action that makes it possible for (or even facilitates) someone else to choose to sin. There is a difference between a pacifist manufacturing weapons of war and an employer paying for health coverage that an employee may or may not decide to use. The difference is the intervening free will of the employee. Employers cannot dictate how their employees use their compensation to avoid indirect complicity in another person’s sin.

As a component of her compensation, health benefits cannot be conditioned on accepting an employer’s religious values. An exemption from the law would mean that if an employee were to elect to use the disfavored method of contraception, then she must bear the cost of those services that her employer refuses to cover. She would effectively be paid less. Claimants in the Hobby Lobby Cases are thus asking for a statutory right to use financial disincentives to change an employee’s moral calculus or to pay less to employees who do not share their religious values. What the 10thcircuit opinion failed to address, in focusing on its impotence to judge the question of indirect sin, is whether RFRA means that religious scruples can justify shifting the burden of healthcare from employer to back down to employee because the employer does not sanction how the employee would choose to spend her pay. Put another way, does RFRA permit employers to pay less to some employees because they have different religious values?

Here, the distinction between for-profit and non-profit companies will be key. Unlike non-profit religious institutions, for-profit corporations cannot justify discrimination on religious grounds. Non-profit religious organizations are exempt from certain laws enacted to redress social inequalities. For example, the Roman Catholic Church is not required by federal law to promote nuns into the priesthood, nuns do not get equal opportunities to move up the hierarchy. Individual women who commit themselves to lives of service in the church do so with the understanding that they are bound to accept church teachings on the different ways that God calls men and women to serve. Recognizing the significance to democracy of both the principles of equality and religious freedom, the 1964 Civil Rights Act prohibits hiring discrimination on the basis of race, color, religion, sex, and national origin but exempts non-profit religious associations. This exemption illustrates that the compact of self-government depends on freedom to dissent, but that such freedom is limited when the rights of other citizens are at stake.

For-profit religious employers cannot justify hiring decisions or unequal treatment in religious values. Employees of the Hobby Lobby chain of craft stores do not need to share the religious commitments of their employer in order to perform their jobs. Accordingly, the right of the Hobby Lobby company to express its religious values is limited by the rights of its employees to the benefits of federal law. The ACA included exemptions for religious non-profit organizations but declined to extend that exemption to religious for-profit companies. Thus, while the ACA pursues a compelling interest in relieving social inequities borne by women, it is narrowly tailored to avoid imposing a substantial burden on the religious freedom of those employers whose religious mission is so central to the corporation’s purpose that employees must share its values. The past several decades have seen society rapidly adopting increasingly progressive social values, leaving behind religious traditionalists who resist these changes. The Supreme Court’s decision this term regarding whether RFRA requires exemptions for dissenting for-profit religious employers will thus have ramifications in American religion and politics for years to come.